What are the Unified Managed Household Accounts trends for the future? Do they augur well for the concept or is it being diluted and frittered away in all the Fintech hype and hoopla? Financial services professionals hear one question from their clients more often than any other: “Why can’t you consolidate all of my investments into one place so I can get a comprehensive picture of my financial situation?” While technology is getting closer to real Unified Managed Accounts (UMA) for an individual, having Unified Managed Household Accounts (UMH) continues to be the Holy Grail of the financial services world. Setting aside the complex web of held and away accounts that would be required to create this dashboard, there are complicated tax and security issues to overcome as well. Has the industry been able to solve the riddle and find the unicorn, or are firms still just scratching the surface of UMH Accounts? Let’s examine the unified managed household accounts trends and shifts taking place in the industry.

Unified Managed Household Accounts Trends

Moving from SMAs to UMAs

Clients are getting a taste of the future with the move from Separately Managed Accounts (SMA) to UMA, but this is simply a tease of the impact that UMHAs could have on the industry as a whole. Separately managed accounts still account

more than double that of UMAs, but that trend is expected to reverse as organizations look for ways to differentiate their offerings from their competitors. Dashboard consolidation provides a more cost-effective and straightforward overview; simplicity that customers and financial managers alike appreciate.  A UMH solution can aggregate brokerage accounts, discretionary and non-discretionary accounts, held-away accounts and those accounts owned by other members of the family.

Current State of UMA and UMH

The business intelligence provided by Unified Managed Accounts is impossible to discount — they provide the holistic view of the customer that help account managers get the high-level insight needed to make proactive recommendations for growth. The added transparency between the financial manager and client adds value on all sides and allows customers to become more educated on matters of personal valuation. However, the situation is not all peachy; aggregation of data between various vendors is sketchy at best, and it’s inefficient to pull information from the wide variety of sources.

Asset Location

One of the biggest challenges is in defining the full scope of held and away assets into one centralized location. As the importance of offering this high-level insight grows, and the potentials expand, more financial firms are exposing their data through easily-attached APIs that provide a more straightforward option for integration. While automation has advanced a great deal even in the past five years, system integration remains a large concern requiring many person-hours and machine time to pull together information into usable formats. The focus is on reducing the need for manual labor, decreasing the opportunity for error and improving the overall accuracy and accessibility of the data and insights.

Looking at a Household in Holistic Terms

The complexity involved in defining UMH household accounts can be quite daunting,

simply due to the multiple points that could be defined for any particular household. There are millions of combinations of accounts for any one individual, let alone a household. Unified household accounts include both held accounts and away accounts, which presents a whole new set of complexities and challenges. Competing financial goals can also be difficult to reconcile across a wide range of assets, but perhaps the most challenging situation facing financial organizations is the display of sheer volume of data and analysis in a user-friendly format for individuals with a variety of knowledge both of finance and technology platforms.

Consolidated Reporting of Accounts Under a UMH

Consolidating family information into a single account has many privacy and security challenges. However, financial advisors are in a situation where they must maintain proper compliance oversight while having enough flexibility to make recommendations — especially important with High Net Worth and Ultra-High Net Worth clients.

Tax Optimized Trading Across Accounts

When financial services clients need to withdraw funds, a major value that planners and managers can add is in finding a way to make the transfers tax-neutral or tax-advantaged. An actual UMH account system allows advisors to optimize for taxes throughout the various stages of life management: accumulation, transition, and withdrawal. When financial planners make intelligent recommendations to re-balance a portfolio for households, the real value of the asset can be realized without taking a substantial tax hit.

As advisors seek to de-mystify complex financial concepts, deep client relationships have never been more vital. When your financial managers are no longer working with data in silos, they are much more likely to present customers with the boon of tax-aware trading and loss harvesting, improving your tax transitions when moving legacy positions or changing between financial managers.

Current State of Unified Managed Household Accounts

While wealth managers would like to present the feel of having a single platform that they can utilize to provide advice to their clients, the reality is quite different. Financial advisors are much more likely to have access to a variety of digital interfaces, all of which provide a discrete subset of data that can then be exported for analysis and ultimately delivered to the client. This means that the “human factor” — the potential for excellent service as well as the opportunity for error — is still very much in play. Aggregating the tremendous amount of data that is available is a task that will not get dramatically simpler anytime soon.

Is There a Future for True UMHAs?

In simple terms, yes — there are huge potentials for consolidation of accounts into a UMHA. However, the challenges are too heavy to overcome in the short-term, and organizations have been chasing this Holy Grail of financial management for many years already without gaining significant ground on the topic. As financial organizations continue to consolidate and cloud-based technology expands, we are inching closer to this methodology that will benefit not just clients but financial managers as well.

Getting to a single unified managed household account requires much different technology and human factors to fall into line. The next generation of clients will be more accepting of managing their finances in this way, and the intersection of data consolidation and users may finally allow for a workable business model. Until that time, individual financial managers will continue to work with clients and financial services firms to provide value and understanding to a wide net of disparate data points.

As of now, Unified Managed Household Accounts trends point to a divergent viewpoint between various stakeholders in the industry.

What is your viewpoint about the Unified Managed Household Accounts trends for the future and where the product will evolve?